Downtown Redevelopment District Bond Rating Downgraded

Story by Andrea Kelly

last updated June 12, 2014

A bond rating is the equivalent of a credit score for a government agency, and it is used to negotiate interest rates when governments take out loans, called bonds.

The Rio Nuevo District was downgraded to BBB, down from A minus, after the rating agency said Rio Nuevo has little control over its revenue from a state sales tax that is supposed to be contributing to downtown redevelopment.

The district in downtown Tucson uses a portion of state sales taxes to spur redevelopment. The sales taxes must be collected in a zone that covers downtown and stretches along part of East Broadway.

The district has difficulty tracking which businesses are correctly filing tax returns, reducing its income, said Fletcher McCusker, chairman of the Rio Nuevo Board. He said that was one reason for the downgrade.

“We are working diligently on trying to resolve the predictability and forecast-ability on the taxpayer data issue that they identified," McCusker said. "And that takes the Arizona Department of Revenue to cooperate with us on that data."

Without state cooperation, the district cannot get information about which districts are correctly filing tax forms to direct a portion of their state sales taxes to the district.

The rating change corresponds to a reduction in the city of Tucson’s rating.

The downgraded rating would have a significant impact on the interest Rio Nuevo pays on future borrowing, but McCusker said the district has no plans to take on more debt.

The rating does not affect interest rates on existing debt that the district is paying off.

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